FM: That was excellent advice if you are trying to accumulate points (Sheraton)...
I may be wrong here, but I think if you have a definitive request, the room is locked in right then, unless you are dealing with an upgrade. A suite is an excellent example of this.
I will share my own experience rather than try to answer each question...we have only had SPG for a year; when we first booked we had very few points, but by the time of our trip, it had been upgraded to gold as DH travels frequently (but we all know from Jen there are multiple other ways to obtain points!).
We originally booked a junior suite. These go early, I'd never count on an upgrade here..we also have five in our family...because we decided we wanted ground level, I called back to cancel the junior suite and book two connecting/adjoining rooms, with the specific request "ground level, poolside, nonsmoking".. as we had been in this area on our last trip. She told me this was an upgraded room (water view) and because of Starwood, it was honored. We had a discount on the room through Disney Club. We were also repeat customers which they indicated on the reservation. We arrived at 8 pm and had no problem with this request as the room had been blocked off. Now, I know my request wasn't popular as a tiny percentage request ground level; I assume this was in our favor.
Jimmie C: I think others would agree that sending requests via the S/D website isn't that helpful. Give them specifics such as "east wing, epcot view, fifth floor, nonsmoking...." when booking as they will indicate it on the original reservation. People on these boards have posted that if you call really close to your stay (a week out maybe? not sure of exact time) that they just might reveal your room number, or at least location to you. Do your homework carefully by checking out Glo's website and all of the Dolphin threads you can get your hands on as far as specifically requesting an area that will suit your family's needs.
They are in the process of renovating the rooms within the next year; it wouldn't hurt to request this. Regarding upgrades, it definitely depends on availability of rooms, i.e., how crowded the resort is at the time. It is never something I would count on, despite Starwood status. For example, when we checked in I heard a couple request an upgrade (this was April vacation week) and they were emphatically but politely told, "the resort is full, we have no upgraded rooms". This is a convention resort, and if there are multiple conventions going on at once (like we had) the chances are minimal.
I hope this has helped a little, my knowledge of Starwood is limited.
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Joanne